As Malaysia eyes shift towards 5G, source says cheaper for Celcom to pay DNB than build its own infrastructure

·3-min read
A woman uses a smartphone as she walks pass a 5G logo during the launch of the 5G Showcase in Putrajaya April 18, 2019. — Picture by Mukhriz Hazim
A woman uses a smartphone as she walks pass a 5G logo during the launch of the 5G Showcase in Putrajaya April 18, 2019. — Picture by Mukhriz Hazim

KUALA LUMPUR, Dec 7 — Telecommunications giant Celcom is projected to spend RM15.1 billion in the next 10 years to invest in its own 5G infrastructure compared to only RM8.1 billion if it were to pay for 5G access to Digital Nasional Berhad (DNB), according to a DNB source.

One source said that Celcom, owned by the government-linked multinational telecommunication corporation Axiata Group Berhad, is under pressure to perform due to its supposed weakened position as well as the constant need for capital expenditure investment to defend its “weak” network quality.

The source said this shows a clear need for Celcom to invest in 4G or 5G infrastructure to increase its capacity, but the option is likely to be decided on what drives better returns for shareholders.

The source indicated that Celcom has other options to accelerate 5G adoption by riding on DNB’s state of the art, low-cost, spectrum efficient Network.

“DNB is not a competing organisation but instead only provides wholesale services and allows Celcom to focus its efforts on retail and enterprise.

“Another option is don’t move to 5G now. Sweat the asset and move to 5G in five to eight years. In the meantime, the nation would miss the competitive advantage against its peers in the region.

“This would mean that Celcom will have to invest an additional RM 16.9 billion to densify 4G coverage as the consumption would shoot up to 150GB per person per month. For similar capacity but much better speed (due to 5G), Celcom will be paying only RM8.1 billion to DNB over the next 10 years.

“Building its own 5G network would cost Celcom RM15.1 billion primarily because they may not spend as much incrementally and can leverage on their existing infrastructure,” the DNB source said, citing an internal market research report.

The source stressed that it was cheaper for Celcom to pay DNB RM8.1 billion than if it were to build its own 5G infrastructure, suggesting that the telco could use the RM7 billion saved to deliver better dividends to shareholders and pay off its debts.

“Though the absolute value is RM7 billion, in terms of present value, the savings will be better as Celcom’s investment into 5G would mean front-loading the capital expenditure and waiting for returns after year four or five to break even,” said the source.

Currently, DiGi.Com Bhd and Celcom are undergoing a merger process, which has been formally received and is pending approval from the Malaysian Communications and Multimedia Commission.

In this context, the Ministry of Finance’s decision to deploy 5G via a single wholesale network (SWN) system had been criticised, with detractors likening the move to a monopoly.

Critics, including Opposition lawmakers, claimed some of the risks linked to the SWN approach is poorer service quality and higher 5G service prices for end-users.

However, DNB officials have repeatedly dismissed the concerns.

Under the SWN approach, the government-owned DNB will deploy Malaysia’s 5G network with equal access to mobile network operators (MNOs). This is in contrast with the current practice where MNOs have deployed parallel 4G networks.

In numerous reports, DNB officials have reiterated that their model will benefit MNOs by reducing cost and gaining better revenue from the leasing of their existing towers and fibre optic cables.

DNB chief commercial officer Ahmad Taufek Omar said the company has offered a free trial of its 5G services wholesale to all MNOs in the country.

The offer is applicable from December 15 to March 31 next year and for all 5G live sites in Putrajaya, Cyberjaya and parts of Kuala Lumpur, national news agency Bernama reported yesterday.

So far, only Telekom Malaysia has confirmed that it will be taking advantage of DNB’s offer to conduct 5G trials.

Related Articles Final decision on 5G wholesale model by Jan 2022, says minister Report: Disregarding competitors, Telekom Malaysia signs up for 5G pilot trial, Celcom likely next Tengku Zafrul: DNB to charge telcos less than 20 sen per GB for 5G service